Heritage Insurance Holdings, Inc., the Florida headquartered but nationally expansive property and casualty insurer, has returned to the catastrophe bond market seeking $100 million or more of north-east US wind reinsurance with a Citrus Re Ltd. (Series 2022-1) transaction.
Heritage has been visiting the catastrophe bond market since 2014, when it first sponsored a Citrus Re cat bond.
The company has benefited from a number of reinsurance recoveries under its Citrus Re cat bond program, but its last issuance was in May 2017, just prior to the hurricane season that drove much of the recovery Heritage made.
So it’s good to see the insurer return to the cat bond market after a near five year hiatus and even more encouraging to learn that Heritage is looking to cover risks from its acquired Narrangasett Bay insurance portfolio.
Heritage acquired Narragansett Bay Insurance Company (NBIC) back in 2017 and the company is named as a cedent for this new catastrophe bond, alongside Heritage’s P&C insurance entity and its Hawaii based insurer Zephyr.
But the Citrus Re Series 2022-1 catastrophe bond will initially only cover north-east US named storm risks, across the named states of Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island and Virginia, which are the states where insurer Narragansett Bay operates.
As ever, Heritage can elect to include a broader range of states under this cat bonds reinsurance cover at resets, but that will never include south-east and Gulf states, which are named as Florida, Alabama, Louisiana, Texas and Mississippi, we’re told.
So this new cat bond to be issued by Heritage’s Citrus Re Ltd. special purpose insurer in Bermuda is to all intents a north-east US wind cat bond, at least to begin.
Citrus Re Ltd. will issue a single currently $100 million tranche of Series 2022-1 Class A notes, that will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement with the company.
The $100 million or more of protection will cover losses from named storms across those named north-east US states, on a per-occurrence and indemnity trigger basis, across a term that runs to June 2025, so covering three full US hurricane seasons, sources told Artemis.
We’re told the Class A notes would attach at $390 million of losses and cover a share up to exhaustion at $760 million, which gives them an initial attachment probability of 1.95% and an initial expected loss of 1.57%.
The $100 million or more of Series 2022-1 Class A notes being issued by Citrus Re Ltd. are being offered to investors with coupon price guidance in a range from 4.25% to 5%, we understand.
It’s good to see Heritage return to the cat bond market and it will be interesting to see how investors receive its first cat bond since 2017, especially as the company has benefited heavily from the reinsurance its cat bonds provided in the past (some of which is detailed here).